Insurance players have a shot at overcoming partisan gridlock in Washington and getting a bill they like signed into law.
The bill, S. 1463, would fix a glitch in the rules governing the Financial Stability Oversight Council — a body that's supposed to help the federal government identify, monitor and manage potential sources of systemic risk.
The House has approved a legislative package that includes its version of the FSOC fixer bill, H.R. 3110, by a 407-1 vote.
Members of the Senate Banking, Housing and Urban Affairs Committee approved its version of the bill, S. 1463, last week by a voice vote.
Bill supporters now have to persuade Senate leaders to find the time to get the bill onto the Senate floor.
The Dodd-Frank Act calls for most of the members of FSOC to be the heads of federal agencies, such as the Federal Reserve chair and the head of the U.S. Securities and Exchange Commission. Treasury Secretary Steven Mnuchin is the council chair.
Because the United States leaves most aspects of insurance regulation to the states, the country has no general-purpose national insurance regulatory agency. To make up for the lack of a top-level insurance regulatory agency, the Dodd-Frank Act requires the president to appoint an "independent member with insurance expertise" to serve on the council for a six-year term.
Treasury Secretary Steven Mnuchin (Photo: Treasury)
Under current rules, if the insurance member's term expires, and the Senate has not yet confirmed a successor, the seat for the insurance member is empty.
The American Council of Life Insurers and other insurace groups have argued that letting the seat be empty leaves FSOC with a troubling lack of insurance expertise, and increases the risk that FSOC will make decisions without fully understanding how the decisions might affect the insurance industry.
The ACLI and other insurance groups say FSOC has already taken some actions, such as classifying some life insurers as systemically important financial institutions, in ways that reflect a lack of understanding of how life insurance companies work.
H.R. 3110 and S. 1463
H.R. 3110 and S. 1463, the Finanical Stability Oversight Council Insurance Member Continuity Act bills, would create a temporary remedy for FSOC insurance member vacancies.
Instead of letting the seat be empty, FSOC would have to let the insurance member whose term has just expired stay on the council for up to 18 months, to give the president more time to nominate a new insurance member and the Senate more time to vote on the insurance member nomination.
Reps. Randy Hultgren, R-Ill., and Maxine Waters, D-Calif., sponsored the bill in the House.
Sens. Mike Crapo, R-Idaho, and Sherrod Brown, D-Ohio, sponsored the bill in the Senate.
Dirk Kempthorne, the ACLI's president, said in a statement about the bills that they would help the insurance industry get roughly the same kind of representation at FSOC that other financial services industries get.
"The bill protects against an unintended vacancy of the independent member with insurance expertise by providing a contingency plan that is comparable to what is already in place for most of the other voting members of FSOC," Kempthorne said.
--- Read Lawsuit Challenges Constitutionality of FSOC on ThinkAdvisor.